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The Unconstitutionality of Protectionism

Sheldon Richman

Even the staunchest free trader might reluctantly concede that the apparatus of protectionism—tariffs, import quotas, and anti-dumping duties—is constitutional because clause 3 of Article I, Section 8, of the U.S. Constitution delegates to Congress “power . . . to regulate commerce with foreign nations. . . .”

Before we make too hasty a concession, however, let’s take a closer look. Clause 1 of the section establishing Congress’s powers states, in part, “The Congress shall have power to lay and collect taxes . . . to . . . provide for the general welfare of the United States. . . .” The preamble to the Constitution also declares that one purpose of the document is to “promote the general welfare.”

What function does the phrase “general welfare” serve? We need not enter the debate over whether the phrase was intended to confer a plenary power on Congress or whether it was only to provide a context for the enumerated powers. That’s an interesting discussion, but it has no bearing on my point, for whatever its function, the phrase contains the word “general,” and the general cannot be the particular. That’s a simple matter of syntax and logic. We are thus entitled to conclude that the government may not grant privileges to special interests.

It may be argued that clause 1 of Section 8, where the term “general welfare” appears, exclusively concerns Congress’s power to tax. This ignores the fact, already noted, that the term also appears in the preamble. But let that go. Are we to believe that while Congress may tax only to serve the general welfare, it may borrow and coin money, raise a navy, regulate commerce, and do all the rest for any other purpose it pleases? That’s implausible.

Moreover, when you consider that anything the government does requires taxation, we are back to the position that all the enumerated powers must be wielded for the general welfare only. Tariffs and antidumping duties of course are kinds of taxes. An import quota isn’t a tax, but tell me how the government is to enforce quotas without taxing the population. How will it pay the customs agents, maintain their offices, and so on? If Congress may tax only for the general welfare, then it follows that anything else it does must be for the general welfare.

That principle having been established, let’s look next at protectionism. Economic theory and history teach us that protectionism perforce harms large segments of society for the benefit of a smaller segment. It is classic special-interest government action. Every time the steel industry asks for restrictions on foreign competition, some sound thinker correctly points out that granting that wish would harm the U.S. auto industry and other steel users, not to mention consumers. As the old Paul Simon song says, “One man’s ceiling is another man’s floor.” One industry’s output is another industry’s input.

The upshot is that since trade restrictions can never serve the general welfare but only particular interests (in the short run), and since the Constitution forbids the government from serving particular interests, all trade restrictions are unconstitutional.

This was driven home recently when it was reported that a group of retailers was trying to stop the Bush administration from doing American textile and clothing makers a favor by limiting competing products from China. According to the Chicago Sun-Times, “Four-decade-old quotas on textile trade are set to expire at the end of the year, ending a system that limited trade in 2,400 items, including cotton shirts and denim. The expiration is pitting U.S. textile makers, who fear more competition from China, against retailers, who want access to cheaper fabrics.”

The retailers’ concern is legitimate. If Chinese imports are not allowed to reach the level they would
have freely reached, then textile and clothing prices will be higher in the U.S. market than they would have been. That will hurt U.S. retailers, which will have fewer sales than otherwise. Of course, it will also hurt consumers, especially low-income consumers, over whom there is much hand-wringing even as they are heartlessly battered by trade restrictions.

This question thus begs an answer: how can limiting Chinese textiles and clothing be constitutional if it harms large segments of the American population? What about the general welfare?

The only possible answer would be one which shows that the restrictions don’t really hurt consumers and retailers. But a wealth of free-trade literature has existed for a couple of centuries showing that this cannot be demonstrated. Trade is beneficial. Parties don’t exchange money for goods and vice versa unless each expects to profit from the transaction. It matters not that the parties live on different sides of a national boundary. Nations don’t trade; people do. Thus coercive interference with trade necessarily harms the people so imposed on, even if it temporarily benefits some third parties. (Eventually protectionism harms even those who seek it. The most dramatic example is the Smoot-Hawley Tariff of 1930, which turned what might have been a brief recession into the Great Depression.)

Why the Commerce Clause?

If my argument is right, one may ask why the commerce clause was put into the Constitution in the
first place. We know the answer. Under the Articles of Confederation, the states to some extent imposed trade restrictions against one another. The Constitutional Convention was called, at least in part, to fix that flaw. The commerce clause was placed in the new constitution as a way of saying that the states may not “regulate” commerce, either among themselves or with foreign nations and Indian tribes. It is a mistake to read the clause as a license for the central government to interfere with free trade.

This is not to say that it wasn’t read that way from the start. The first Congress passed a tariff. Tariffs were repeatedly used to limit imports and protect American manufacturers. (They were also used to raise revenue.) But this can’t change the fact that each protective tariff, perhaps contrary to the belief of the policymakers, helped a special interest at the expense of everyone else and was thereby constitutionally defective.

Would the Supreme Court buy my argument? Not likely, considering the case law since the New Deal. In the 1937 case Helvering v. Davis the court essentially abdicated its responsibility and left it to Congress to decide what’s general and what’s particular.

Not once since then have the federal courts struck down an act of Congress under the general-welfare clause. It’s one reason we’re in the mess we’re in today.

A constitution should be interpreted on the basis of its purpose and plain language. We need not resort to the imagined original intent or the private letters of its framers. The great libertarian lawyer and abolitionist Lysander Spooner made a mighty contribution to the philosophy of constitutional interpretation in his book The Unconstitutionality of Slavery. At the end of this shamefully neglected work, Spooner proffers 14 rules of interpretation, which he derives from the application of reason to the task at hand. Among the rules are “that the intention of the instrument must prevail,” that “the intention of the constitution must be collected from its words,” and “that all reasonable doubts must be decided in favor of liberty.”

The Constitution proclaims its purposes in its opening words: “to form a more perfect Union, establish justice, insure domestic tranquility, provide for the common defence, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity.”

Thus any particular clause must be read in light of these purposes. And any government action that
violates one of these purposes is at least suspect. If earlier legislators violated common sense, and hence the Constitution, we need not be bound by their errors. Protectionism cannot serve the general welfare. Therefore, it fails to pass constitutional muster and ought to be forbidden.

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